Fynsa
Although the Fed is nearing the end of its rate-hiking cycle, the federal funds rate is still likely to rise further, given the strength of the labor market, though at a moderate pace.
The Central Bank decided to keep the rate at 11.25. The question now is when there will be any developments on that front.
Higher interest rates put pressure on valuations during 2022, but the focus will now shift from valuations to corporate earnings in an increasingly challenging macro environment.
The Central Bank will take into account factors other than inflation in setting its monetary policy, such as the current account deficit, financial conditions, and international trade.
Most baseline scenarios for 2023 assume either a soft landing or a mild recession, under the assumption that inflation will decelerate significantly and that the terminal policy rate would be in the range of 5.0% - 5.25%.
The risk of reducing the MPR and then having to reverse it due to a misreading of the information is much higher than leaving it at 11.25% for longer than appropriate.
The Chilean economy is in such a state of imbalance that it cannot respond in the way it normally would in this type of situation.
